TaxTMI 
TaxTMI 
2025 (11) TMI 1089
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....ariff Act, 1985 and for payment of Central Excise duty and for compliance with Central Excise statute, they had obtained Central Excise registration No. AAECB4979QEM001. The appellants runs its business as a private limited company incorporated by a joint venture (JV) agreement dated 19.07.2011 entered into between Shri Nikhil Bhatia, an Indian resident; M/s SMS Meer India Limited, an Indian company and M/s Officine Meccaniche BBM SPA, Italy, in order to establish state of art manufacturing workshop comprising full-fledged fabrication, machining, quality control and assembly shop. During the course of EA-2000 Audit of the records maintained by the appellants, the department had found that the appellants had manufactured their final products out of certain raw materials supplied by M/s SMS Meer India Limited, who are one of the JV entity and cleared the final products on 'bill to/ship to' basis to the customers of M/s SMS Meer India Limited. However, the audit observed that the appellants had failed to pay the central excise duty on the final products on the price at which the principal manufacturer i.e., M/s SMS Meer India Limited sells the goods to their customers in terms o....
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....eir customers, the appellants had agreed to such arrangement. Further, as the supply of equipment/machinery by the appellants is only a part of the entire turnkey project, any minor variation in a crucial equipment may result in the failure of the total project, and thus they had accepted supply of free of cost material given by their customers. These are either imported or ready-made branded goods; all other items required for manufacture of machinery are procured by the appellants from their vendors. The appellants had not raised any invoice for job work charges; rather, upon manufacture of finished machinery/equipment, requisite excise invoices were issued for the value of entire machinery/equipment and the appropriate excise duty, VAT/sales tax have been paid thereon, and necessary tax returns were also filed for the relevant period. 3.2 Learned Advocate further submitted that the appellants is not a job worker as the manufacturing facility is owned by them and the technical personnel, managerial skilled laborers, quality testing team are employed by them; procurement of entire raw material is also done on their own account by using their own funds; and thus the appellants a....
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....orks Bhiwandi. 3.5 Learned Advocate further submitted that the value of the free issue material which is merely given by the customer to the appellants for assembly or fitting purposes; and the value of such material have been included in the sale value of final goods sold by the appellants. The transaction between M/s SMS Meer India Limited and the appellants is a purchase and sale transaction on which appropriate VAT have been paid, and the periodical sales tax/VAT returns have been assessed by the State Excise/VAT authorities. Therefore, he submitted that there is no element of job work involved in these transactions, and the contention of the Department for revising the assessable value and demand of differential duty is not legally sustainable. 3.6 Learned Advocate stated that in respect of clearance of goods made by appellants to their customer who is an inter-connected undertaking, to the extent they both are not covered as 'related person' under clauses (ii), (iii) or (iv) of Section 4(3)(b) ibid, the valuation of goods shall be done on the basis of transaction value as per Rule 6 of Rules of 2000. In support of their stand they relied upon the following decisions: ....
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....re shall be levied and collected in such manner as may be prescribed a duty of excise to be called the Central Value Added Tax (CENVAT) on all excisable goods (excluding goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the Fourth Schedule :...... Legal provision after amendment w.e.f. 01.07.2000: [Substituted by the Finance Act, 2000, w.e.f. 1-7-2000] Section 4. (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall- (a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the goods are not related and the price is the sole consideration for the sale, be the transaction value; (b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. Explanation.-For the removal of doubts, it is hereby declared that the price-cumduty of the excisable goods sold by the assessee shall be the price actually pa....
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....ther matter; but does not include the amount of duty of excise, sales tax and other taxes, if any, actually paid or actually payable on such goods." Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. "Rule 3. The value of any excisable goods shall, for the purposes of clause (b) of sub-section (1) of section 4 of the Act, be determined in accordance with these rules. .... Rule 6. Where the excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing directly or indirectly from the buyer to the assessee : Provided that where price is not the sole consideration for sale of such excisable goods and they are sold by the assessee at a price less than manufacturing cost and profit, and no additional consideration is flowing directly or indirectly from the buyer to such assessee, the value of such goods shall be deemed to be the tr....
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....ssessee, then the value shall be determined in the manner prescribed in rule 9. Explanation.-In this clause "holding company" and "subsidiary company" shall have the same meanings as in the Companies Act, 1956 (1 of 1956); (b) in any other case, the value shall be determined as if they are not related persons for the purpose of sub-section (1) of section 4. Rule 10A. Where the excisable goods are produced or manufactured by a jobworker, on behalf of a person (hereinafter referred to as principal manufacturer), then,- (i) in a case where the goods are sold by the principal manufacturer for delivery at the time of removal of goods from the factory of job-worker, where the principal manufacturer and the buyer of the goods are not related and the price is the sole consideration for the sale, the value of the excisable goods shall be the transaction value of the said goods sold by the principal manufacturer; (ii) in a case where the goods are not sold by the principal manufacturer at the time of removal of goods from the factory of the job-worker, but are transferred to some other place from where the said goods are to be sold after their cle....
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....deals with the situations where the assessee and the buyer are related persons as per sub-Clauses (ii) (iii) or (iv) of Clause (b) of sub-Section (iii) of Section 4. (ix) Rule 10 (a) deals with situations where sale is to related persons as per sub-Clause (i) of Clause (b) of sub-Section (3) of Section 4 also known as inter-connected undertaking where the assessee and the buyer are, in addition, also related persons as per sub-clause (ii) or (iii) or (iv) or the buyer is the holding company or a subsidiary company of the assessee. (x) Rule 10 (b) deals with situations where the assessee and the buyer are interconnected undertakings as per sub-Clause (i), but they are not also related persons in terms of sub-Clauses (ii) (iii) or (iv) nor is the buyer a holding company or a subsidiary company of the assessee. (xi) Rule 10A deals with specific situation of manufacture by a job worker on behalf of the principal manufacturer and the definition of job-worker is also provided therein; (xii) Rule 11 deals with situations which are not covered by any of the above rules. 8.2 In the impugned order, learned Commissioner (Appeals) has given his findings a....
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....tanding the above, I further find that by undertaking the activity of manufacture of excisable goods using some inputs supplied by SMS free of cost the Appellant qualified to be job work of SMS in terms of the Explanation to Rule 10A of the Valuation Rules and accordingly the value is also required to be determined in terms of Rule 10A of the Valuation Rules. I find that in any case the assessable value for the excisable goods manufactured by the Appellant shall be the normal transaction value at which the same are sold by SMS as the provisions under the Rule 9 read with Rule 10 of the Valuation Rules and/ or rule 10A of the Valuation Rules lead to the value applicable for the Appellant to be the transaction value of SMS. 14. In view of the above, I find that the demand succeeds on merit and therefore the same is recoverable along with consequential interest under Section 11A(4) of the CEA read with Section 11AA of the CEA..." 8.3 In this regard, we find that Section 4 of the Act of 1944 specify that valuation of excisable goods shall be determined as 'transaction value' in case where the buyer and seller are not related and the price is the sole consideration for the s....
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....and thus the appellants and M/s SMS Meer India Limited are 'related' to each other. However, there is no relationship in terms of 'distributorship' or 'dealership' between the two business entities or any other business interest, directly or indirectly, between them. 8.5 Further, we have also examined the relevant legal provisions concerning 'related person' as follows. The essence of the legal provisions contained in Section 4(3)(b) of the Central Excise Act, 1944, state that persons shall be deemed to be "related" if - (i) they are inter-connected undertakings; (ii) they are relatives; (iii) amongst them the buyer is a relative and distributor of the assessee, or a sub-distributor of such distributor; or (iv) they are so associated that they have interest, directly or indirectly, in the business of each other. In the Explanation clause it is clearly provided that "inter-connected undertakings" shall have the meaning assigned to it in clause (g) of section 2 of the Monopolies and Restrictive Trade Practices Act, 1969 (64 of 1969); and "relative" shall have the meaning assigned to it in clause (41) of section 2 of the Companies Act, 1956 (1....
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....hine with accuracy of 27 micros on 2.4 mts; assembly department having the facility of hydraulic power unit and an electrical control desk for functional testing as well as for motor and spindle running test of the machinery. 8.7 As per the agreed terms and conditions between them, the appellants had proposed to sell their manufactured final products and M/s SMS Meer India Limited, customer/buyer had agreed to purchase the same, by pooling together their finances and technical expertise. The supply of free material by M/s SMS Meer India Limited to the appellants is only to ensure the quality parameters of the final product. From the purchase orders and illustrative pictures of the machinery supplied by the appellants as placed in the records of the case, it also transpires that the fully manufactured machine/equipment has been supplied by the appellants, whereas M/s SMS Meer India Limited have only supplied part of such equipment viz., hydraulic tank unit, main electrical panel, control desk as free supply of materials to the appellants. Further, in the excise invoices issued by the appellants to their customers such as M/s Jinal Aluminium Limited, M/s SMS Meer India Limited, th....
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....terial, packing material, master batch, stickers, manufacturing and other overheads, as fixed from time to time with profit margin plus sales tax and excise. The payment shall be made on weekly basis. On careful perusal of the MOU, we note that same cannot be considered as arrangement for job work. Infact, an identical MOU was the subject matter of decision in respect of another manufacturer in Gowhati. There the original authority held that there is no job worker arrangement. The fact M/s. Nilkamal has sold the said furniture with much higher price and hence Rule 10A of Central Excise Valuation Rules, 2000, apply to manufacture of the appellant is not tenable. The goods sold by M/s. Neelkamal is on the higher price as it includes expenses like storage, advertisement and sales after the goods were received from the appellant. Hence, the difference between the sale price of the appellant and sale price of Neelkamal by itself will not justify the inference of job work arrangement" 9.2 We further find that in the case of Commissioner of Central Excise, Nagpur Vs. Ramsons Casting Private Limited - 2017 (357) E.L.T. 431 (Tri. Mumbai.), the Co-ordinate Bench of the Tribunal has held t....
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.... for the reason that relationship is related to the partners and partnership firm, whereas in the present case respondent and the buyer are two independent private limited companies. In view of our above discussion we are of the considered view that the respondent have correctly valued their goods sold to their group company..." 9.3 We also find that in the case of Poona Bottling Co. Ltd. (supra), the Co-ordinate Bench of the Tribunal has held that in the absence of evidence, to prove that the job-worker entity are the employees of principal manufacturer, or that they have acted as the agents of principal manufacturer, the assessable value can not be resorted to as though they are job-worker of a principal manufacturer. The relevant paragraph of the said order is given below: "11. On merits, the short question for consideration is whether the petitioners were manufacturer of soft drinks for and on behalf of M/s. Parle Modern Bakeries with whom they had entered into franchise agreements. The petitioners would be deemed to be manufacturing the soft drinks for and on behalf of M/s. Parle and or Modern Bakeries only in two contingencies, namely (a) when they are employees o....